2010 (8) TMI 434 - HC - Customs

EPCG scheme import of cars - Export obligation - export obligation - export obligation with the direct use of the imported cars - capital goods capable of generating convertible foreign exchange - respondents have fulfilled their export obligation - appellants not been shown that there was any fraud, concealment of facts or misrepresentation or misdeclaration on the part of the respondents - no substantial question of law arises Appeal dismissed

Summary

Issues:
1. Interpretation of EPCG license conditions for duty on imported cars.
2. Fulfillment of export obligation under EPCG license.
3. Use of imported cars by a travel agency for earning foreign exchange.
4. Validity of the order confiscating the cars and imposing penalties.

Interpretation of EPCG license conditions for duty on imported cars:
The case involved appeals arising from an order passed by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) related to the duty charged on two BMW cars imported by a company holding an EPCG license for a travel agency. The customs authorities imposed duty at 5% on the basic amount, subject to fulfilling an export obligation. The company fulfilled the obligation, but customs initiated proceedings for recovery, alleging the cars were not used directly for earning foreign exchange. The Tribunal found that the cars were used for travel agency services, attracting foreign tourists, and facilitating incremental foreign exchange earnings. The Tribunal opined that the EPCG license did not restrict the use of imported cars solely for export obligation fulfillment.

Fulfillment of export obligation under EPCG license:
The Tribunal determined that the company, engaged in the travel agency business, utilized the imported cars for intended purposes, such as attracting foreign tourists to India and providing travel-related services. The Tribunal noted that the company had not shown any misuse of the cars beyond the scope of travel and tour services specified in the EPCG license. It concluded that the foreign exchange earned through services facilitated by the imported cars could be considered as fulfilling the export obligation.

Use of imported cars by a travel agency for earning foreign exchange:
The Tribunal emphasized that the company's services, including arranging air and train tickets, accommodation, and sightseeing, were crucial in attracting foreign tourists, leading to foreign exchange earnings. It highlighted that the imported cars played a significant role in the company's business activities related to travel and tour services, contributing to foreign exchange generation.

Validity of the order confiscating the cars and imposing penalties:
The High Court referred to a previous case involving a similar issue of imported cars used by a travel agency. It highlighted the balance between the Revenue's stance on direct use of imported items for export obligation fulfillment and the assessee's argument on demonstrating export obligation fulfillment regardless of direct use. The Court stressed that imported goods must be used for the importer's business activity, without diversion for other purposes, to comply with the EPCG scheme. In the present case, the Court concluded that the company had fulfilled the export obligation as required by the EPCG license, and there was no evidence of fraud or misrepresentation. Consequently, the Court dismissed the appeals, stating that no substantial question of law arose.